Fiscal balancing act

The chancellor could be forced into additional spending cuts or tax rises if economic and fiscal forecasts turn out unfavourably given his target to balance the budget by 2019/20. In its green budget 2016 the Institute for Fiscal Studies (IFS) said George Osborne faced considerable uncertainty over key tax revenues and may find the spending squeeze hard to maintain. According to the report he faces several challenges on the tax side.

For example the chancellor has promised £8bn a year of income tax cuts in the form of a higher personal allowance and an increased higher rate threshold. These promises are currently unfunded so delivering them will require equivalent tax rises or spending cuts elsewhere.

Further his forecasts depend on him raising fuel duties in line with the retail price index – something he has failed to do since 2011. Freezing them for...